Analysis on the current situation of China's semic

2022-10-18
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Analysis of the current situation of China's semiconductor industry with imported chips costing more than oil

Abstract: in June 2014, the outline for promoting the development of the national integrated circuit industry was officially released and implemented; During the 13th Five Year Plan period, the central government's fiscal and tax preferential policies for the semiconductor industry mainly continued the Guo Fa (2011) No. 4 document and Cai Shui (2012) No. 27 document that set positive and negative experimental angles during the 12th Five Year Plan period, which became a good thing for the semiconductor industry

at the press conference of surging S1 chip a week ago, after thanking partners and fans for their support, Lei Jun specially made a PPT to thank the government on the screen:

"making chips costs a lot of money. The government supports me this time. In fact, my understanding is that money is not important, but it brings warmth to us when we are dying. I hope that after seeing our report card today, whether the Zhongguancun, Haidian District, Beijing municipal government can give us more support."

in 2015, when it was rumored that Xiaomi was at the peak of "core making", there were different opinions on Lei Jun's determination to make chips in the market. At that time, it was said that Xiaomi made chips because Lei Jun was unconvinced, and everyone has been criticized for its weak technology research and development ability; Some people also say that it is for the problem of patents in the Indian market; Some competitors said that their brands play a greater role than their actual role; Some even said that it was the government's support

Lei Jun thanked the government at the launch of surging S1

If Lei Jun hadn't made a straightforward statement this time and controlled the development direction of the industry more accurately, many people would think that the statement of "government support" is very funny; The media, partners and fans on and off the stage of "confession" also saw Lei Jun's laughter after the confession PPT, which was also meaningful

after all, the support of 2million pilot fund is not even a little finger for Xiaomi, which has spent 1billion yuan to make cores. However, at the surging S1 press conference, Lei Jun publicly called for more support from Zhongguancun, Haidian District and Beijing Municipal Government for the first time, which made us have to ponder the current situation of China's semiconductor industry

the government invested hundreds of billions of dollars in the semiconductor industry

in June 2014, the outline for promoting the development of the national integrated circuit industry was officially released and implemented; During the 13th Five Year Plan period, the central government's fiscal and tax preferential policies for the semiconductor industry mainly continued the Guo Fa (2011) No. 4 document and Cai Shui (2012) No. 27 document during the 12th Five Year Plan period, which became favorable for the semiconductor industry

however, during the 13th Five Year Plan period, the central government has restricted the qualification and support of IC enterprises to varying degrees compared with the 12th Five Year Plan period. Instead, it has given financial support to domestic semiconductor enterprises or assisted in the acquisition and merger of international large factories by directly taking shares in the semiconductor Industry Investment Fund (hereinafter referred to as the big fund)

the first round fund of the national integrated circuit industry investment fund Co., Ltd. (ciciif), known as the "big fund" of the national team, is about US $20billion, but according to market estimates, the total investment of the local government and state-owned enterprises will exceed US $100billion in the first round. As of September 2016, about 60% of the $10billion Fund approved by ciciif has been invested in chip manufacturing, 27% in chip design, 8% in packaging and testing, 3% in equipment, and 2% in materials

"made in China 2025" mainland semiconductor industry policy objectives and policy support

from the above figure, it can be seen that the most important policy objective during the 13th Five Year Plan period is that the domestic self-sufficiency rate of core basic components and key basic materials will reach 40% in 2020 and further increase to 70% in 2025. However, with the domestic IC domestic demand market self-sufficiency rate of less than 20% in 2015, during the 13th Five Year Plan period, in addition to the significant expansion of wafer foundry and packaging testing capacity, domestic IC design enterprises need to invest more research and development in key core products

there is no shortage of money, but overseas mergers and acquisitions are blocked.

IC insights, a market research institution, pointed out that to achieve the goal of 70% IC self-control rate in the 13th five year plan of the Chinese government, we need to rely on two basic elements: capital and technology, which are indispensable. At present, with the support of large funds led by the government, capital will not be a problem

however, since 2014, China has tried to acquire technology practices by acquiring foreign semiconductor companies, such as ISI and omnivision. Now, the acquisition strategy is not effective. The vast majority of foreign governments are very vigilant about China's ambitions in the integrated circuit industry. It is already very difficult for Chinese capital to acquire foreign IC companies. IC insights even believes that the peak of opportunities for China to acquire technology through the acquisition of foreign IC companies has slowed down

just a few examples:

in February 2016, Fairchild rejected the US $2.6 billion takeover offer from two Chinese buyers, China Resources Microelectronics and China Chuang, and chose on semiconductor, which offered a lower price than Chinese companies. The reason given was also that it was worried that the US regulatory authorities would block the transaction. Also in February, Ziguang shares, a subsidiary of Ziguang group, announced that it had decided to terminate the US $3.775 billion acquisition of Western Digital, an old US storage company, also because the US overseas investment commission would be involved in the review

in December of 2016, China Fujian macro core Fund issued a statement on the station, withdrawing its takeover offer for the German semiconductor company elstrong and returning the previously purchased shares of elstrong. Although the German Federal Ministry of economic affairs withdrew the approval order granting China Fujian macro core fund 670million euros to purchase elstrong, some media said that the Obama administration played a crucial role in blocking the deal

it can be seen from the above that Northrop Grumman Corporation (NYSE: NOC), a subsidiary of Northrop Grumman Corporation (NYSE: NOC), is a company specializing in aerospace and composite material development. Western countries are becoming more and more cautious about China's investment in the semiconductor industry, even "limited". Penghongbing, deputy director of the Department of electronics of the Ministry of industry and information technology, once said in an interview with Wall Street:

"the United States has too much unnecessary anxiety and does not want these conflicts between the United States and China. At the same time, he stressed that China must reduce its dependence on semiconductor chip imports."

according to customs statistics, the import of integrated circuits in 2016 was 342.55 billion pieces, an increase of 9.1% year-on-year; The import amount was 227.07 billion US dollars, a year-on-year decrease of 1.2%. In the same period, China's crude oil imports were only 607.8 billion. China has spent nearly twice as much on semiconductor chip imports as on crude oil

according to the data of Bain Co, China's annual consumption of semiconductors is worth more than $100 billion, accounting for nearly one-third of the total global shipments, but China's semiconductor output value accounts for only 6% - 7% of the world. Many imported chips are assembled in personal computers, intelligence and other equipment, and then exported overseas. However, there is still a huge gap between the number of semiconductors produced by Chinese chipmakers and the number of semiconductors consumed by China itself

investment fever is becoming the "catalyst" of the semiconductor industry.

in order to change the situation of relying on others to provide semiconductor chips for a long time, China has taken various measures to support it since 2014. In the past, it used to promote the development of semiconductors in a "wide spread" way. During the same period, it invested in 130 semiconductor factories in more than 15 provinces, but the effect was poor. With the further increase of policies and the significant upgrading of the infrastructure of China's semiconductor industry, global semiconductor companies have taken the initiative to determine their China strategy to cooperate with Chinese manufacturers to avoid being excluded. Gartner, a market research organization, predicts that in the next five years, some international fabless semiconductor enterprises may shift as much as 50% of their wafer procurement demand to Chinese foundries

at present, there are two semiconductor investment driving engines in China, "big fund" and Ziguang group, and they are not soft on wafer factory investment. Recently, there have been successive projects such as SMIC international, Changjiang storage, Nanjing Ziguang, etc. not only China's own people are spending money to build factories, but also foreign enterprises are actively investing large amounts of money in chip manufacturing in China, presenting a rare prosperity of "domestic and foreign" investment over the years

from Samsung's additional investment in Xi'an memory chips, the launch of SK Hynix Wuxi No. 2 factory in South Korea, to the formal confirmation of the transfer of the 12 inch wafer factory "lattice core" of GFD GF to Chengdu, covering the two major fields of memory chips and wafer OEM, the geographical scope is all over Central China, East China and West China

specifically, in the field of wafer foundry, Grosvenor's competitors: TSMC's 8-inch plant in Songjiang, Shanghai and 12 inch plant in Nanjing; Liandian Xiamen 12 inch factory Lianxin; Not to mention SMIC's new 12 inch plants in Beijing B2, B3 and Shanghai. The Chinese market seems to have become an indispensable investment destination for wafer foundry layout. For Grosvenor, of course, it is no exception to actively look for the location of its plant in China. China will not cede its excellent market to competitors

it is obvious that the domestic semiconductor industry is ushering in a wave of investment boom under the joint promotion of policies, Chinese manufacturers and foreign players

however, two uncertainties need to be noted

in terms of policy, from the tough measures taken by the Obama administration to prevent domestic funds from entering relevant fields, to the new US President Donald Trump's continuous attacks on the mainland's trade behavior and advocating the return of manufacturing, people have to be vigilant

in terms of technology patents, Samsung, Hynix, micron, Intel and Toshiba may make articles on patents with the increase of Chinese local manufacturers and overseas expansion. As the above-mentioned memory manufacturers have been manufacturing DRAM and NAND flash memory for several decades, there are many applications for memory technology patents, and the product line is expanded widely, few new manufacturers can develop new DRAM and NAND technologies found through analysis without infringing existing patents

Xiaomi represents a new step for domestic manufacturers, but China still has to cross these thresholds and challenges to move towards high-end manufacturing

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